COLOMBIA'S ECONOMY FORECAST TO GROW

COLOMBIA'S ECONOMY FORECAST TO GROW

Colombia's economy will grow at least 4.5 percent this year and is likely to carry on at the same pace or faster next year, Finance Minister Rudolf Hommes told Reuters in an interview.

Mr. Hommes also predicted that the government would keep its budget deficit to 0.6 percent of Gross Domestic Product this year and to 1.2 percent of GDP in 1994, which is an election year.Top priorities for next year would be privatization of banks and a crackdown on tax evasion, he said.

"This year will end very well," Mr. Hommes said. "I think growth will be above 4.5 percent, I don't know if it will reach 5 percent, but it will be between 4.5 percent and 5 percent. Unemployment is low - in September it was 7.9 percent - and inflation will be in the order of 22 percent."

"Next year economic growth will be 4.5 percent to 5 percent again and the government is committed to a deficit of 1.2 percent of GDP, which is low by world standards."

Mr. Hommes said Colombia's independent central bank believed this policy mix, plus a stable real exchange rate and unchanged interest rates, would push 1994 inflation down to 19 percent.

This, he said, was as long as salaries were not allowed to rise by much more than 19 percent, the rise in fuel prices was kept to 19 percent and public sector tariffs - which foreign banks say are artificially low - were kept to 22 percent.

Mr. Hommes rebuffed domestic critics who say public spending is rising too fast and industry is stagnating, accusing them of using figures selectively and not taking into account that the government's policy of opening the economy to foreign trade and privatizing has produced transition

pains.

"Growth has not been even," he said. "There are sectors which have benefited a lot and there are others with problems."

But Mr. Hommes said agriculture, textiles and clothing, which were hard hit by foreign competition, appeared to be recovering and blamed exporters' problems on the sluggish world economy rather than on domestic factors.

"I think it's admirable to have the economy growing 4.5 percent in a world which is not growing," he said.

Colombia's traditional exports of coffee, oil and coal have suffered heavily from weak world prices in the last two or three years but a construction and import boom, plus the opportunities opened up by a free trade deal with Venezuela and Ecuador, have kept the economy growing.

Mr. Hommes predicted that imports would increase 20 percent in dollar terms next year after a 40 percent rise this year, showing that the explosive growth of recent months was beginning to fade.

Privatization of the country's state banks remained a top priority for next year, he said, but conceded that the government was unlikely to sell off more than two banks - Banco de Colombia and either Banco Popular or Banco de Estado - before it left office in August 1994.

"Banco de Colombia is the most urgent and then either Estado or Popular" he said. "I don't think we'll manage to sell three."

As far as the privatization of the coffee growers bank Banco Cafetero was concerned, Mr. Hommes said there was still no agreement between the government and its current owner, the National Coffee Fund, over how the entity should be sold or what timetable the sale should follow.

Were there to be agreement, the bank could be sold easily because the coffee sector had already shown interest in buying it, he said.

The government was also actively pursuing buyers for the Betania hydroelectric dam in southern Colombia and the Termo Cartagena power station, he said.